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SYY Sysco

Participants
Neil Russell Vice President, Investor Relations, Communications and Treasurer
Tom Bené Chairman, President and Chief Executive Officer
Joel Grade Chief Financial Officer
Karen Short Barclays Capital
John Heinbockel Guggenheim Partners
Vincent Sinisi Morgan Stanley
Judah Frommer Crédit Suisse
Marisa Sullivan Bank of America Merrill Lynch
Kelly Bania BMO Capital Markets
Karen Holthouse Goldman Sachs
John Ivankoe J.P. Morgan Chase & Co.
Edward Kelly Wells Fargo & Company
Ajay Jain Pivotal Research Group
Bob Summers Buckingham Research
Andrew Wolf Loop Capital Markets
Call transcript
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Operator

Good morning and welcome to Sysco's Second Quarter Fiscal 2019 Conference Call.

As a reminder, today's call is being recorded.

We will begin today's call with opening remarks and an introduction. I would like to turn the call over to Neil Russell, Vice President of Investor Relations, Communications and Treasurer.

You may begin, sir.

Neil Russell

morning, good and Natalya, everyone. Thanks, second Welcome XXXX call. fiscal to Sysco's earnings quarter

are in our and Grade, Officer. me Houston Tom Executive Joel Financial Chief Joining today our Officer; Chief Bené, and Chairman, President

material note we company's and Private the Securities of the intentions, manner. future that Before forward-looking management's in results please statements during could within that or predictions this or expectations Act the statements Litigation actual made differ beliefs, are Reform states presentation of a meaning begin, the

today this Officer, one corresponding and At each Chief limit their over and Bené. to can included in measures factors the follow-up. about ensure participant results but differ that time Tom filings. information call on our XXXX, Investors presentation risk cause I'd to Additional release time that ask turn statements Chairman, App. one XX-K SEC in we'd report to measures the annual to, of all the includes, in copy Form subsequent from slides in morning. at could GAAP forward-looking President A presentation of the in section answer factors end and question or to for to our sufficient to like the the are issued Executive is This IR our year our also comments the Non-GAAP measures contained to be and sysco.com these is at limited like questions, today this to those via company's XX, materials The website. To these in not and be news contained of reconciliation in filings, non-GAAP Sysco's Investors in our found of financial the ended can found SEC the included slides. earlier June are section the we have time,

Tom Bené

discussion our results are you comments current to with with along key for like drove some a financial and and start environment continuing by with as joining the our U.S. and then will the then for discuss in followed on everyone, recent operating detail. results, some we Joel of a more business morning, themes International this Foodservice segment. morning thank discussion quarter, results of Other that Good always changes, concluding organizational business our the in, us. with I'd macro Operations

and For quarter, to execute results the designed improved our improve top-line on strategic are second year-over-year overall our saw we to performance. priorities continuing

our experience remain the plan excellent efforts achieving doing for provide Our quarter enrich customers' to business consistently our service, to customers focus help by was be objectives. of our to successful. Sysco and financial led three-year We to with committed

the them discuss manner will look which what few this we slightly moments. outlined. a in may achieve originally further we Joel just from in different Although

increase adjusted gross a operating adjusted of expense of quarter and an million; X.X% sales for growth an income $XXX.X billion; X.X% increase Our $X.X to include: profit growth to operating X.X%, of delivered growing volume U.S. outpacing to to local volume national X.X%, per was X.X%, per solid with share case $X.XX. of was U.S. X% which decrease operations, Broadline growth X.X% Local this within of $X.XX within case grew share second billion; earnings $XX.X results of the which Total organic. quarter. X.X% and adjusted organic, of which was Broadline

customers. and to large the national expected lapping previously this due of quarter two we HFM lapping volume As the of discussed, softer overall acquisition

financial in remaining markets, remaining with see labor we driven macro recent are market U.S. we are we factors in number industry operate, broader as at economic segments Even the environment, unemployment in there which at December, including which In see the spending. confidence sales, drivers to consumer of restaurant solid growth, by consumer confidence with as higher continue low that particularly traffic and the and the Looking good is to store of think in overall industry, sales trends, indicator of strong, be key Brexit we confidence. and mixed volatile fairly and normally the same uncertainty do a step. discretionary consumer the we important though international foodservice the X.X% mixed. continue still In about which and the is dealing somewhat UK, And with outlook economic where concerns consumer next business. to continues perspective, lastly, it's from over

spending this and geographies. the international we balanced business. And do trends we in seeing decent is other some strength generally in other markets overall with However, where speaking, are industry consumer

growth. Ireland the were better examples changes, stakeholders, of Turning making leadership of agility, to existing Waugh business. organizational that announced. In to company recently changes now week, to further in evolving continued and of will increase I'd specialized part examples customers address the public: compared our its support and create wine us aligning and topic we distributor, to to and will Though customer growth total with smaller acquisitions their order strategy resources acquisitions distributor will our to for all which Foods; we spirits leadership business in two in be of and for business and Last majority our established to important Drinks. our are an business. U.S., like and executive further and especially one strategy. one transactions, is portfolio product costs, the Ireland, independent our These closer implemented made Central Waugh value M&A, Sysco, M&A operating of drive these new across getting and reduce by of help accelerate which Sysco some is the changes to size transition the Classic M&A great strengthen organizational to Foods needs. streamline our align are overwhelming continues model its first Drinks decision restaurants. And with these Classic an Illinois the a with the

difficult one, in on focus to organization key And the this a sharpen reduction is salaried while enable is in step growth. XX% the Additionally, and strategies any support an our reorganization results company's impacts essential this which our an associates to corporate decision approximate realign positions.

Now, versus impacted the for of were our the total towards of market Sales grew continued basis business initiatives U.S. by in Gross And category I'd X.X%. end increased in contributing a positively growth dollar usage ongoing quarter Foodservice quarter an profit innovation points remained brand, gross grew $XX.X our Operating quarter second in to spot increase was segment operating increase the Operations. Edge year, transition during like XX benefiting X from our first billion, in the quarter of X.X%. growth, flat, X.X%. months growth an increased second management profit income X.X%. segment to Cutting with results the the Inflation expenses inbound beginning but also relatively to which reduction Sysco gross growth. our Overall up profit was case by platform. prior and Solutions freight, of local

customers. Our value-added continue products for our Cutting to provide Solutions Edge

these cases best We launch utilization XX% increase could for ordered. note, new will taking platform, excited ordering Also yet. next we about that our improved which we are be also digital continue a be weeks, in believe innovative over of the local in has place to products an of of our our of which couple see

customer-facing platform. in driven both areas. primarily our the cost transportation and our Additionally, on expenses improvements continue an warehouse increases continued improving shopping refreshed grew expense we by supply-chain to From make quarter, including the operating delivery tools, digital progress to and a perspective, app for

have recent in continue better seen and focused While we mitigating quarters, these to we cost on costs. increased areas managing remain these in

onboarding an training recruiting, continue to and focus example, efforts. As we on specialized

in retention, in starting to an especially see are the improvement We warehouse.

Ireland, year-over-year, some Ireland the UK, Pallas improved strongly softness ahead our top-line in X.X%, quarter Moving on we strong to in Operations sales sales our by Canada, operating business continued of operating profit for France uncertainties growth continues we was customers surrounding synergies And holiday business. protest to our Vests team schedule. some decreased From new by saw Yellow income impacted to perspective, we impacted despite from performance a initiatives. the the Alberta. in for perspective, segment, integration decreased in UK, grew as a International Foodservice the and and top-line the Brexit quarter, International X.X%. by timeframe. adjusted gross the challenges X.X%, a X.X%. with performance several result, cost adjusted are the onboarded in In Brakes In expenses our International was In chain of our the And during supply segment, in as had against the critical execute merger increased

is new Sysco integration Our This as World an only event Food the to leading Hospitality on and well, important the last provider. we week to a France of position into building service Brake our at progressing launched European is brand Lyon. in step French Sysco Davigel but market food SIRHA Service France our France and not

are growth well these experience impact accelerated have we our Europe, in the quarter. are to and designed discussed, related customer point enrich Certain moment strategic a in Joe investments also our have this which to us position Items long-term its making we discuss further As in the will we this plans, markets. and

industry on focused quarter we continue improving we to the as on was optimize performance down in performance. and business operational Moving SYGMA, segment to for our our this remain overall

an summary, segment customer business continue potential to to X.X%, thank our across as company customers service We though continued In had disciplined to their our pleased remained be of cost and make top-line our continued our choices for associates Overall, the during and increased other the lastly, term. strategic tariffs, Sysco We quarter, priorities and long in Supply in increased our performance. of distributor improve increased deliver the service are long-term of and we product we like for challenge experience, our industry. against efforts choice and our of profitability of about the excellent with to expect and customers. the business And strong impact an shipping solid. performance X.X% fundamentals excited make plan to business. our in cost the all dedicated hospitality food effort a in strong a for remain top-line And customer softness the segment, due provide to gross in to in availability I'd continue operating products for leader improved industry performance this the Guest to the to finally, of profit the see in overall, sales to with

Now, over I'll Officer. Joel to turn Financial Grade, the Chief our call

Joel Grade

you provide performance I our Thank to with Good the additional like would everyone. you, for surrounding details morning, quarter. financial Tom.

increase X.X% quarter for As Tom last decreased year. second increased sales compared were X.X% same increased and Gross noted billion, Sysco foreign rates exchange the basis in sales period points. quarter Changes X profit to second $XX.X X.X%. margin the the total gross for in an of by

X.X% up U.S. expectations. in meat, primarily our operating categories, the produce. with During performance with few December, quarter, the for a of growth by total driven expense Sysco was we Broadline particularly were Adjusted growth, leverage frozen in inflation, operating in our and dollar X.X% gross for business, line the our potato, experienced paper quarter, to regard expenses profit

did Changes we of to to plan. of compared an year. of three the on foreign and by our basis first last continue transformative capitalized increase initiatives We previously fiscal X.X% quarter the us the this $XXX.X of the quarter, operating XX Total income adjusted which rates have fundamentals. second performance remainder will for to year. compared the adjusted improved trend strong we operating We the our third points. in and to that million year quarter, in this to exchange decreased income on place, remain improving business half While same discussed year period focused the the grow allow in was

We'll to achieve execution, by and continue technology provides objectives. centralize as overall. focus this effectively of to on financial evolve work, we and the some further accelerating and our with continue standardize us assessment our are strong placing confidence a including in leveraging work Sysco emphasis our company, while all strengthening implementation of which to of As business, order we on holistic to

initiative a from cost we're reminder, in this increased fiscal second benefit As to the of savings expecting see year. this half

operations. half important work initiatives We're mostly efficiently with fiscal centralizing modernizing work our effectively. more work global can of This activities, Transformation we starting is done partners automating this our begun financial have transactional cost expect these working Finance be platform, to second Changes the U.S. the and about and see benefits year. the where within Some our offshore first, and Roadmap. include: of in

area focus our Smart initiatives. second Spending The is

and business, areas. the In and accelerated in cost take to being this spending indirect in and second identify of detailed year. Regionalization, these execute work highly we a Canadian anticipate leadership decentralize. categories half which been view our benefits of our on about Here, the we overall structure Canadian of historically is the reductions Again, optimizing fiscal realized has

progress finally good have and made great overall We feel far. expenses. the thus opportunities administrative regarding And we've about here

either innovative drive aggressively three-year initiatives business, drive example line which to An plan cost we plan. or original new We streamline some the the our out our business objectives, growth. efforts but that ways transformative our changes and the for only look discussed in and aligned are earlier the accelerate also regarding continue structure. will to incremental new to not unit of with to with be Areas organizational

Turning to earnings per share.

adjusted for $X.XX EPS decreased per Our quarter $X.XX to the share.

this were EPS tax Our rate. results our quarter by impacted

rates fiscal fiscal As benefit to year benefit a to U.S., second our back FY XXXX XXXX. as compared quarter beginning the second The in larger reminder, compared reduced in fiscal lower adoption retroactive XXXX, to benefit rates a the we of of due in tax to fiscal quarter as XXXX our are U.S. created of XXXX. saw in the the retroactive while of XXXX the tax quarter the fiscal in second fiscal

results impacted by like to year. last year higher quarter. were minute in quarter a than exercises stock that EPS about, this than anticipate of amount year period is we Our prior we rate increased less to option also due the effective take fiscal Item this changes, this to expense, now would why remind our large Certain talk rate and same in like be variable would also I tax I interest XX%. the you a for had to which to

strategic our related in plans to for investments a designed us position our business growth. making long-term continue We

which these and the The our severance. in largest Items Certain Roadmap our Items to in primarily including businesses second significant of the the European initiatives is integration Canadian restructuring the Ireland, in quarter business, to Our multi-temperature investments, related and of related Finance are Certain France France Regionalization. Transformation included our

position the our continued initiative with France fiscal for the beginning and businesses restructuring, benefit from France expect French these see France in success we our discussed this in businesses Brake us integrating of to two are France. we've will merger As XXXX. Sysco we business Davigel The And marketplace. in well to in

initiatives this Additionally stated, Regionalization from Roadmap and we Finance Canadian as anticipate in benefit Transformation of second year. our have we fiscal the seeing half

primarily to was first cash flow to turning Cash XXXX, period. Now $XX.X million flow. million the operations weeks lower cash XX compared weeks $XXX.X higher from to receivables. XXXX was $XXX.X prior and The which first was million, prior million fiscal the payables fiscal compared cash continued year. the was in the which XX flow $XX.X of improvement Free year for to in of free flow for was due improvements

we relief achieve million reminder our through expenditures million three-year second are to $XXX.X deferred so customers remain comparison. to this of $XX.X At an operating capital was executing a adjusted we second due the Harvey, this initiatives Net business prior fiscal and weeks to quarter tax is quarter fiscal our lower the first our cash in our totaled results period. impacting As flood by associated for XXXX, which on compared we point, XX summary, the XXXX, payments year-over-year objectives. $XXX focused our and saw improved halfway and In through the we for increase year plan million. income supporting Hurricane

ready and performing position. solidify committed goals, satisfaction our always customer high to level are our we Q&A. now and are to to achieve for are achieving a Operator, on committed consistently we We as industry-leading

Operator

Barclays. question line [Operator Instructions] Karen is Your Short the first of from with

Karen Short

Hi, thanks.

you just gross that? savings much to how skewed things, versus maybe OpEx, layoffs. percent does Just couple will it now update to an with of as it at a these that dollars to we on so give coming Can think look more OpEx from about clarify be profit seem of the

Tom Bené

Yeah, Karen. hi,

more wouldn't some relatively we've –if chain. in the So of flat would supply I the than just plan, dramatically call had say I it the more. kind it's of levels this it, about half first Certainly we've challenges had somewhat think part we of for of again, inflation. - three-year most you But

some I administrative a of the just as certainly reductions. So emphasis little is and to say chain talked bit we've seen of But, on inflation the challenges cost some of more would supply more on shifting, returning continue there I bit that really guess, - work obviously, focused, the would I side. we're but - about mitigate it again, say we to Again, say wouldn't of somewhat the dramatically I earlier. some again,

Joel Grade

supply you - really And, Karen, gross have last the think it have about about sharing might as buckets, I few you two cost. over higher we quarters. think and been is And big what just I we're add. what our that I and mean, profit you talking chain we've had if been had costs really

having side. that still to we're on balance So the cost

gross of more of the buckets the on. kind it's and really that we're cost It's shift. cost really profit some So - focusing between isn't big

Karen Short

Okay, shared but corporate I it's layer right? number, So just one the for bit to of be that fair forward that services as supply for lower? the we sorry, - corporate look modeling the quite or the should chain benefit in when say purposes, out month of included going a to number quarter, three only model clarify, that at corporate the the

Tom Bené

of yes. would that corporate moving it be included have expenses there on point, some so at forward, impact so will this Yeah, not any

Karen Short

local case organic color slide quarter kind I longer of be the past, would And Okay. follow-up then, case and know actually don't great. was but in slide any you the I with curious that is And guys of no so because have that growth asking, highlighting on in you only a had in kind my said just you growth was was if line plan. general, internally

Tom Bené

the that. as think on as feel look far growth, back we about the local the growth. case sure I - that really not good Let's case slide. about But I'm

the say of little in It back which maybe but we feel little I a kind than dramatically we came was choppiness was good little not less towards stronger there the end, But would different. a think about. of quarter. it is I planned had bit

Karen Short

Thanks. Great.

Operator

Your John Guggenheim next question of line Securities. is Heinbockel with from the

John Heinbockel

customer? could maybe Hey, what guys. of of span the changes through because do - because you market how side, So then you quick do of the chain sound in against some layers How your terms go happened impact of management? adverse operational? differently command to of of they a Tom, here maybe and question, more on on this made any guard walk you you control, organizational

Tom Bené

thanks. question, Great John,

with, let's spans we of in were kind fact the think focus, the made around in about when And changes the layers focused So start key streamlining very corporate. you business. was and

make And so, was. when kind think our organization, I agility focus to quickly. or mean, to about really organization, how to to of This this selling or growth little we improve kind ability of do our not to you customers where plans, decisions is about impact the more our our none. of that's the

heavily of heard, And so, office. focused it's were a my team. or probably on you changes And saw there as corporate with leadership couple

there is, our And group. continue closer area. kind an layers we've technology looking some we maybe group some you we technology going will here could a all. probably two some felt One core doing we traditional on and within are and of cost got And continue spans changes in we've And we're kind organizations work of and adjustments. as technology and that perspective, through where how highlighting. mostly remove headline redundancy innovation couple then work exercise together. to got some that. the more priorities the at focused we been areas bring of to a outlined been work, the that key we we a worth like got From we've some a we've get and around So were We've that leadership us candidly those make is

is And good so, and feel what taking a us We about got of the we've IT area. was great we've there kind deep doing. the a change very saw you work the we're place team bench The traditional news got here. within for

you don't think our with don't should and I miss beat expect so technology to certainly efforts. a expect we And

years, we our were of administrative kind lot under had an a there a have in is role a think - was think we communications other combination company the the was thing some as about about that about even that it couple that last other work. administration a role things think some It tucked of CSR, over role. The of of area, of

an work streamline we that here organization. so, there was opportunity and like And felt to that

And Eve Corporate - the and named talented Secretary. obviously we we we of here that Chief which our Chief was role, at important placed so, a Officer. Legal And new Sysco, the now part is Officer who McFadden promoted Legal woman

so, of again, or think I no And our our certainly there, or from any an business focus. strategic really impact from overall customers perspective

largest so, are probably the are those And highlighting. changes worth that

Joel Grade

to costs cost that add inconsistent. said, reiterate Yeah, and just any and that in are We're were Tom something these none if I out could were not thing one yeah, changes of just saying way growth. John, supporting actually

selves. think to I work customers certainly But our tighten really important nothing point between done is that's there here going been impact and that's connection is this So streamline done to growth. the that an our and

John Heinbockel

the you you past, one seeing? But then feel And can to thing, pass compared in Maybe relative all you about in it and as you do it's cost do it's in or How other look clear to a now, little customers December, you and saw right, assume right to - more pressures the are past challenging? you let's does. the through your have inflation, not going maybe at if it think right, continue. the pass-through that's if if last step-up

Tom Bené

Yeah, really I seen we've a change think big don't there.

level, modest think said, look, hard we've to very much as good pass still always performance. long a I is our continue driving as inflation that. but Sysco we brand, lots good lot talk of feel including to we've kind of But to ability through, too remains think, which as our about. Clearly, it got at we in tools I here really do about tool-belt this it's

helps as And again, value good seen generally we've get of basis obviously, customers we XX Sysco quarter. us ongoing well. this a I our It benefit them we that that, And for just talked and, provides about lot. brand. think was again, some from kind that it points it's

John Heinbockel

thank Okay, you.

Tom Bené

You bet.

Operator

Your is the Sinisi Morgan Stanley. line of question next with from Vincent

Vincent Sinisi

Hey, great. my taking for Thanks very question, much guys.

as reductions. does into the just follow-up how give of Just color grand fit on on to other of more of that especially of you the of couple Is bucket say wanted the of Can fair the ones cost initiatives, through kind and maybe little that's might headcount us be the among a go we scheme kind years that them bit next it here? largest to kind worth cutting terms progress? noting in

Tom Bené

So Joel talk to go things and let I the consistently think here we've me start about. let I'll been to it's too. And important talking back

an puzzle, the all primarily action is that that, this piece to cost cost work one on also areas Joel together. really I to is overall between buckets years, we plans and the that big say balance about X administrative broadly. I slightly need had think has this. side different these mean, mentioned it of of was three-year numerous continue had this the this addition talk, But certainly part is of because increasing of focus When part of focused you we about, about be us the But the than And cost talked the large plan. the as Yes, of the we talked wouldn't over overall. delivering on just times. initially So recent a to maintaining that in important cost that that supply the that is administrative And area about has chain side. been we area may

let I'll Joel that, of that. with kind on So build

Joel Grade

I were those. multiyear that are had cases looked Vinnie, that Yeah, one of being that benefits outside we in fact scope. those. are also cases, those - the accelerated that some some that able at things this in add, think And the of there of of to be on talked main is were would things. be then we some And scope these have initiatives some only about the we've thing in this we And I'd

And would so, and to things as thought those overall talked this be be incremental sort things in we of about discussions the other some words at that one of of about cost will that. we

And benefit dollar about still would And part there obviously so, think again, get to large - that growth our this gross it. very again, as a a way from as we're that's is well. I profit the looking reminder, is of anyways, just

still just laid again, So - with like those balanced it were And to these further acceleration that some approach, that consider a some very I mean, additional incremental I as we things. things of this of out. the is - that plans

Vincent Sinisi

That's And quick then just comment. you. follow-up a guys. Okay. helpful Thank maybe

through? had a prepared in kind how I on you your update said in where on remarks managing quick usage. us reduction you market think you you give transportation, cost, are that a a sequential just basis spot of Can able better guys freight and you're to be

Tom Bené

like if ago hit And that in comment, increase the about if I very because year you in had a quarter spot this that. the when we as better everyone we just think and managing was to to utilization really pushed for of last hit specific kind market market. done of really the four freight. a big think much of quarters we - - tight probably got scrambling. Yeah, got it's spot We We that talk job inbound think everybody about market a

down. And overlap that into went so that was really I'm referring year, this it's to as we that

we kind we year think But saw over ago, spread kind year impact was when quarter. took biggest of It's this over certainly I'd higher the last year. some because the of a that's a about the So the year out I it than freight inbound quarter last we for is talked new just normal. say benefit year.

Vincent Sinisi

guys. Good helpful. that's Thanks much very All super it. Got right, luck.

Tom Bené

Yeah, thanks.

Operator

Suisse. the line Your next of question is Judah Crédit with from Frommer

Judah Frommer

taking on Hi, commentary. Maybe the case question for the first independent thanks growth guys. just

versus the flattish that very one do more about And positive being it's independents trajectory talk while chains mixed. And talking recently? what of about a and to and two think more small those been kind sales being concerned independent can same of point at I business? talking the store traffic you you've been been that get you've about you about that store

Tom Bené

Yeah, Judah. good morning,

continue mix about kind feel I changes last about quarters that to the business. we and We've about our I talked this continues, and of or think think, good feel this of regional micro are the change of kind over still of we because for proposition good couple true growth the we of We this two-unit that decent we those kind we ones as independents, our one- position about think there, and the the you're continue of said value have to talking about operators. a kind of Look, see there. growing customers.

very business outlet is feel good the that we the type generally of they're they driven still and running providing. But about that. much experience are and by speaking it the Now the

I you've it I on heard lot So and very still talk a there this and is fragmented. the think, overdo - market - us as won't

So it's the is there fit. - to are fairly good good acquisition Sysco's a are Waugh good out while size, good and there, example, where relative a of example really a distributors small who were doing a are lot even acquisitions great regional of business still

of guys with and great a Sysco that example can how the great organization leverage some a and are it's capabilities so we And great we independent bring. and those driven work have heavily they

position, I look, saying, the that our certainly about prospects in. of we think, growth marketplace feel our good really way our given long-winded and operate we So still

Judah Frommer

than maybe hitting I the did and part inflation exit that inflation that that, offset your to X.X against then, we XXXX those there, better QX, And combination some QX re-ramping you you backdrop. in tougher was we feel warehouse guidance be of kind great. causing of say to the fast targets consternation that of about Would Okay, of some if and midpoint of flattish labor forward was kind expense XXXX that pressure rates kind months operating just you ago? quickly, on and would there do rewind saying the would of kind

Tom Bené

Well, I feel about targets good think, we long. XXXX are the

still three-year feel this So what how that. might we've said, deliver But I we think, very we about is comfortable and have about that. about of deliver plan some good talked shifting to we ability feel our consistently we

Joel Grade

going the been is consistent laurels, other saying some achieving chain causing a we're not things, - expressing Yeah, in we've our think, inflation we've But confidence in certainly our us out because - just of couple stuff. that said in called in of to to and continue supply our some - things we I think, Judah, accelerate we're we've we side. saying targets. just since are I sitting Obviously, on that after low pretty

Judah Frommer

Great. Thanks.

Operator

Sullivan is next Your of Marisa from the line America. question of with Bank

Marisa Sullivan

Good Thanks savings. my I morning. for cost taking wanted ask to about question.

the you've that to that growth been in that initiatives you gap term kind half. more and back between a basis in get profit more the in points you back is longer Or OpEx XQ? will that of Do XXX and long-term get dollar that kick take think of - time that gross of to back level? to some roll you'll talked about As

Joel Grade

Marisa, Hey, it's Joel. Yeah.

of think order next would type get but to would half over including way that don't year, the we've those exceed that, we again, that fiscal the express obviously, second be give to our gap. in our six targets. of we say back what quarters. think confidence believe, mathematically So in fact that this about I Again, And the ramp - talked that would of or continue necessary as about way. the in to quarterly would that some we'll I our guidance, is as and I about areas three-year rate we achieving

tell we I that have over confidence, of express So again, say you I'm that to course the be certainly those six and continue not to would that would case the I'd giving just mathematically specific quarters. guidance,

Marisa Sullivan

morning. corporate announced that maybe is to to the to mid- did And reductions higher-end go find then that to in? incremental room on Got pockets of the the this P&L? When get to more more have of on roll back you to and quickly How kick improvement there to you. kind you've they they EBIT And range? did

Joel Grade

why question when does So start the I that third will to quarter. I be the mean, don't so it start in kick I in here? think

I other to always guess, the benefits so the thing I And here; there second would ways Tom again, job start and always sort asked, hey, to you're initiatives fiscal out. doing? got often Are then we laid look of that's looking do for Again, this. we've opportunities. our to you'll again of QX half see those year. in some certainly, continually of we're chime in again could and for And other over get key things the different we've this say,

timing. clarity that on And so some the we'll gives But that. certainly continue you to do hopefully,

Tom Bené

and optimize Yeah, associates constantly I time, or have we're we business, for the be same continue an overall looking us, now. this, as things take good is anytime Marisa, right the accelerate the with that at and that's and for responsibility said. this are really our doing well it's to I have our in do to ways you I be mean, it like some feel not will very about to we whether improve plans to think I take of time think but not, think difficult that organization, an place need customers - action - we this involved and here. we'll or to the experience seriously business tell those to But going

Joel Grade

thing And again, - not again, these not are record out here, growth our cost facilitating that Yeah. I actually in things again, taking are only we - company. a I'd the just think to of broken like are sound but not

And so I really that's important. think just

I continue message we clear. continue to invest in ensure to that this grow, important the we're to we also loud and opportunities continue look investing to company, in think, right make for and places to streamline. just to it's sure We that is

Marisa Sullivan

Thanks. Super helpful.

Operator

Kelly question Bania the Capital. next BMO is from of with Your line

Kelly Bania

questions. taking for morning. good Thanks my Hi,

was just just And reduction, that then, back talk I impact forward an was One, guess, going Or of about questions. any of always on dollar just it three-year or of can of of the a this of to Just to pulled plan annualized timing original structure was you the the your change expectations? the there part terms in relative the to the standpoint two workforce I basis? size size it? on clarify into

Joel Grade

for thanks Yeah. Kelly, the Hey, question.

We've given I - would my didn't as XX% amount. of of dollar This amount, of that. things that We magnitude one as our characterize again, - this as those of that be is incremental I fall in no, so actually not some first in of you the that get going? those sort given would what the stuff of we we of this categories about as one and hey, of often support, The talk - on question, things. we plan. the part - certain corporate this talked a guys actually those It's one remarks, that. are been dollar the in of things but have couple question dollar all, So mentioned of positions the about are else

And talked fallen so we in not into specifically that key would initiatives of this or one about. have we our the things about talk Day Investor often

Kelly Bania

continued is of like the then of sounded terms really part plan? curious that it Okay. the in in in of has January for half you're quarter? expecting maybe terms what and the latter inflation, Perfect. started that And in Just the inflation your into back

Joel Grade

Kelly, here say, would I I has think that called quarters. expectation of Yeah, couple And is next over modest levels of this our point, continued. at that inflation the

Kelly Bania

behavior But or independents distributors well any of talked don't about that your about from maybe obviously, of in just you to from big curious you Okay, or hear well. with set, the to we catering the the a competitive group at two-thirds you're picture share. But get regional them strategy are of distributors, on changes bigger other you look one-third basis? what performing on a seeing seeing that great. And with this just in then, independents three as really of some those regular

Tom Bené

some very as very big I good kind seen well we basis them. everyone, they change, very there there that remains don't a been always is of we and say we've Kelly, that capable - of different visible there. this the very industry. highly kind anything obviously, I competitive, And fair I on this from and so regional ones to public regional of good to think think, lot or compete they many And Tom. while, business, and competition in have with. out there just when certainly continue are that's I talked fairly three, the amount, in are all distributors you But there a this this about of know, but Hey, mean, good it really dramatically companies large competitive, But but them as out would new or don't be. we are

Kelly Bania

Thanks.

Tom Bené

You bet.

Operator

Your Karen line from next Goldman Sachs. question of Holthouse with is the

Karen Holthouse

taking thanks questions. for Hi, the

inflation on Just the commentary.

would quarter about pretty you a Or that to for So really the how months, north just would quarter? view rate in little temporary? were X% driven Is by With just flat the ended it you up the December. that bit some - that and then that it? really third Thanks. way parts imply are math two is think ahead into of more the first was December? the right X% that think running there in to about you probably run And of that as the of

Joel Grade

Yeah.

that we're of So And - first all, X% December. doesn't for for or us say math Karen, it's wouldn't again apply inflationary months, over of - so the Joel. was were couple the say slightly We over I'd flat. I - first the

December, in certainly as I implied some acceleration it mentioned. So

Some levels not I the the as in second modest half again, year. of X% we half the of that second inflation, year. again, of would quarter. the into anticipate, it's inflation carried inflation anticipate we over into But head the And third of heading

Karen Holthouse

Okay. Thank you.

Operator

the Morgan. line from J.P. of is question with Ivankoe next John Your

John Ivankoe

you. thank Hi,

well. some wanted that the growth, seeing I about back First, I a that up participating negative couple what changing next to the economic prepared the store over of traffic years? terms sales being be which of less sectors And think expectation get as you follow you're the remarks maybe of but might Can sectors to growth better I'll - this even and mixed. are towards on and same overall of were you're in elaborate industry, the in the you're sectors then discussing positioning how have towards slower

Tom Bené

about sectors obviously think lot of industry the various I the over restaurants this mean, - market. the the talked Sure. about you about if and and the of we've you if years, segment a being think largest

think, but start talk spend, it's Let's highly and variable. I the there, the traffic about we

the about X%. the QSR dining traffic think down X%. X% a was spend spend it midscale timeframe about they call was was slightly, you NPD last traffic was during midscale, the was traffic basically driving And of - was about down if about and was So during the from up up last and that also casual the this perspective, spend up. then and majority up total was

think segments mix, of within about if you kind it's the So various the restaurant.

we've As lot lots different of participate a in we talked also segments. though, about

opportunities be to see a and sector places to like retail education, in continue growth Foodservice segment. healthcare continues We certainly growing

continues depending but so it's it is and maybe in of for for a a certain continue but somewhat see based, the ethnic been we segments of growth little there that's to few be we've areas solid to lots within as years segments ethnic talked well. a growth continues more on out now, more And And to And also focus geographic be growth. there. restaurants us see

John Ivankoe

the The wanted anyway Obviously, of suggest in Could I servicing point. value tone we're where helpful of consistent. their question your overall level customers. expectation associates there point change remind marketing profit more just more can maybe it's were a sneak some best comments if the a before more the less local maybe Okay, you to we clients where at XX% associates is adding at us order regarding additive the maybe whether like final of the one, ordering now local to case another digital to serve type or growth of and now would are growth be of if the that relatively case point you to associates I despite the or it one ordering can doing next more see in they're corporation? was stable, and sounds a can tipping at marketing and marketing a lot get doing

Tom Bené

question. a That's good John. Sure,

or EDI. lot that of portion a higher segment, our business I it's have our national about been is time actually because And - the online a this contract quarters question, talking it remember think online. a business kind within is for through we've same actually or done is So this - of it's business like of over a important but local But few is local kind because things tools associates. we good now, to marketing the share an had and ago, a that we percentage at like were hit had adding we're XX% this we that that those that focused also or we we available the enabling time, wanted could year once we now go. where is, And opportunities. where we were some us there. talked felt about addition we identified Think really We've us of share some were was some important about that resources sure gotten gaps about that bigger to had target make to through we

that from given As we stable we tools customers a where it I percentage and somewhat place selling today, our our organization. provide of do think think about given we're to perspective. ordering, of additional we're some continue the a resource in

seeing or But thing. at territories, we our selling good larger to dramatically are that's we We change resources. think as way reduce a aren't looking this a

are our a very, they that from to part our very model. important we feedback valued. continue customer of know they're And highly We believe

be So they opportunity it's but to really in have more has effective, making our consultative, tools with business to been that customers which want to them our also also do model. obviously continuing the focus help more the them and way our sure to, more about us give

John Ivankoe

geographies segment even then challenges type on types that the is that that segment? excuse your the that. business is spirits world for for a lot of final question, and especially a type in around me, distribution. of in might of the does have that a one-off Obviously spirits Classic you per-state wine in Is which there the of And basis, and acquisition you? segment, of terms Great. of U.S. for Thank - Ireland. applications But Or - that Drinks, in wine of unique-to-Ireland you? unique be wine has, other a

Tom Bené

big In small competitive wine would set. a competitive we I Ireland, In it's amount unique market, small particular, - - a say the is part and of that maybe and Europe. a to parts in Spirits. some of of set the the more a Ireland little sold Wine spirits or of had we

that puts in compete great Drinks Classic a broadly us to in more the spot So acquisition really overall market.

state-by-state unique, it it it's and strategic I'd laws for U.S., don't point, that's that a little have the more the of this here is something nearly - Sysco. so think at And in as the a market, something appropriate about so I'd say kind that shift have is for we not say, they but that

John Ivankoe

Thank you.

Tom Bené

bet. You

Operator

the Wells of question is Edward next Your Kelly from with Fargo. line

Edward Kelly

Hi, guys, good morning.

Tom Bené

morning. Good

Edward Kelly

to question I with gross a case. wanted on off start profit per

obviously quarters, of dollars would in that re-inflation, mean, continue profit the should exceeded industry, else kind Broadlines things so that good that expect I couple that is after there was are encouraging. Is freight, this I gross imagine over obviously. stalling last I forward? normalization mix. growth the in again U.S. Your for of, guess, case inbound you really we local better here and anything driving that and going all of to

Joel Grade

Yeah.

is this Ed, I think Joel. -

XX this other think pretty up - think, well. you I - our quarter. you the I only The again summarized something is brand thing add I thing the our brand percentage probably might that's growth. points it Again, in local sales

So mean, I that's say I'd area that's one impacting that. think that's - I strongly other certainly

a if I talk that of I about, impact you're that an recall did talking piece again us. overlap inbound - for some it a right, a of call things you it think was bit freight mean, year And the Tom's was again were the so ago, issue, to I'd point, few fairly we little about, sizable you other

broadly that, impacts at brand, speaking, that. certainly more normalizing little I on think influence we the fair probably but to think bit a some there's heavier I look some - had the of So mix, inflation inbound again from the way the a heavier and some it's freight, the of

Edward Kelly

the right. and All growth driver but And pay. reasonably that's on obviously, still labor in high, QX, from a side, OpEx then OpEx moderated warehouse the and just bit

how Just thoughts increases? there wage terms of are things on of on on all where for at both in you and whether about you having any down thinking necessity the those thoughts sides settling are wages are future raise to of Just you?

Tom Bené

Hey, Ed.

any internal don't dramatically kind that we're change increases were cost that, think we the some of a expenses. is Where buckets on that operating how I Having say side, OpEx forward. larger on about happening it significant the certainly, expense. going we level on so at and are going what's think, the I like anticipating talked cost said is necessarily after hourly really inbound do I'd to new we of the big we those drive are of focused go some

this And per cases things so there there all for like mile. are business, - are as driven, in you like things miles know,

the can the drive days efficiencies got really in to that cost the can factor and impact bit fact talked in case. So mitigating bring cases that a a and environment on, or that deliver We lower that focus us we've trying vehicles past. we're the that a and feel delivery per we kind performing we in the those that non-CDL are well. initiatives that We've in at that's of things about couple we think early cost a drivers helping small

sustainable a basis we that knowing on to the we we'll So probably do if more see have our that coming just cost, operating and it's than think utilization we to don't going - our expense, I to forward. continue resources. did that and we've the of now trying that number ultimately and kind it's those hit we're higher us, the of the are do of of headcount will, in then a help But wage past, lot you trying think front I things spike manage broadly new more that's overall overall rates a in now

Joel Grade

the of I of hired retention some that challenge just newly thing the is also think - if are the we part was associates. one I can to of our again, add having of some

think was lower then other And little it which driving time, then so, I over is which bit are productivity. is things that driving

have our the to where processes some of on think that again, with our Tom's better I that we of agree. some I our ensure hiring, and and - driver on also significant so, onboarding in terms I side, think hiring, And think I we're do the warehouse point, to both emphasis rate making a training, the retention

we're out past really certainly in leveled somewhat, not but say the a issue. it's to think position I

Edward Kelly

rate, quick half I'm full than year XX%, lower you on one rate? guess the just the that's we tax think you. when I I Joel, what back-half the that. the for rate should tax adjusted rate tax the And, is in asking say about first think tax one How you at

Joel Grade

way about just I be think about the that. Yeah, XX% - would I whole would would look a the rate at run

Edward Kelly

Thank you. Okay.

Operator

Your Ajay next the Research. question of is Jain with line from Pivotal

Ajay Jain

Thanks morning. for good in. hi, sneaking me Yeah,

cutting focused on it sounds initiatives On that the those cost are like operations. you've just announced, mostly U.S.

can the the there's So latest the additional of breakdown don't component headcount the breakdown cutting regional if U.S., And cuts cost geographic within give But the I international cost you and relative corporate? on reductions. between what's for know any then, initiatives? operating any companies

Joel Grade

so Sure, here. start I'll

had office discussions - we corporate in and exclusively cost cuts it was So on and U.S. regarding focused business really the the our here corporate on our was support.

it U.S. It this what in specifically was a, think support I'll was our field-related. not U.S., really I corporate call, and operations. - was and So the again

in we of some what U.S. was think changes about related had the our some items the we of bringing businesses related together only. - specifically I the of did about talk certain So is a infrastructure again, in them asking on France. you're But to, few

Ajay Jain

what dollar an amount want didn't response can the with associated that's layoffs? for But savings a to confirm you know I provide expecting cost in to least restructuring you're charges, at you the overall for And Okay. question. earlier

Joel Grade

haven't given we not We're planning Ajay, that Yeah, to. out.

Ajay Jain

Okay. Thank you very much.

Joel Grade

you. Thank

Operator

with line Bob is of question from Summers the next Your Buckingham.

Bob Summers

good Hey, guys. morning,

the volumes on how impact from shutdown? being January was You any any but back end. comment quarter, But during the about coming talked the choppy and toward

Tom Bené

the I don't of an impact we shutdown. saw think much from

the delivering what that has feel started. hoped. it's the about we good is And how quarter on think we had like we trajectory that I'd say I feel

Bob Summers

is then it I to transformation Spending quarter? fair saving having and cost to the the the think you're when half that back circling get trying weight Okay. to numbers, the Smart fourth that toward and more say impact, to second And us about

Joel Grade

I I of in that, think pretty half everything doesn't day improvement said mean don't QX mean that, in second I that Having is that anticipated in the we saying that happens. we've we been know year. we've like consistent said Bob. the one

through of where quarter, kick so little consistent in, bit bit these been suggest And the over second a quarter third things a course moving as would bit be QX. a then of I over there And things ramp But a pretty is little happen, a stronger. guess which the do again, of it's we've fourth half. spreading again

Bob Summers

think growth, would you allow to below track. sufficient you for to up, the to plan, Right, get of to say, expense are spread that drive achieving to point that articulated spread some think X.X%, which about course. you've And they back expense the that? all lastly, hold then, I fair which savings opportunity as the if have couple enough the at Is overachieve and quarters a about you to on that that on you'll flex

Joel Grade

certainly of is. we and it certainly opportunities there, continue but yeah, And certainly again, fair. I acceleration think again, acknowledge that, look think I to for that's

Bob Summers

thanks. Okay,

Operator

Wolf Your of final is question from line the Andrew with Loop Markets. Capital

Andrew Wolf

Thanks and good morning.

this comparison case face I think will. cycle local So ago year economic growth, if the toughest U.S. you the the quarter, of you

is that a the you macro the be I how commentary January comparisons. quarter? got said the for easier case this model just and that So to than you made, get leap much somewhat really, better about you Tom, of us faith like you too guess given It of what shouldn't you growth environment, showed

Tom Bené

we prior couple think lost that did I'd this of it and quarter, lapped. start about the In customers talked we a cases a I from ago, HFM, also year here. national large acquisition Look, we quarter with, about second we some we and talked again

a going one be we've year, another going lapping of third done have we the that did last kind we're to we're that larger that ones acquisition quarter. We in be than the to lapping

line start to hoped had what the is, what commentary say, we quarter would I my So expected. around it's and we with this in

generally with. that, you you that feel happen said happened all are were ago. frozen living know, we many to we so, we saw Having things We all - guys happen - and vortex that always quarter And the deal of up the week a polar come see where good. throughout the

things so, of geography. the that certain like in see as impacts little And parts you from well

way say we're your projections change we've momentum We feel hoped on So thoughts, good would about had feel like there's another. would that had. that I the necessarily think we your one for. just I or don't path the we should And anything

good I incremental the right we think we've by we're now. like deliver you back-half, should lot of - about the primarily the commentary driven upside we've can feel is and feeling that feel talked the given we pretty we activities, about, a good cost

Joel Grade

- obviously, The Tom third I some is coming is, QX but only our to of remember, couple, talked our is just our again, big March, thing. so March, reminder as March a trends But, said to out certainly so our a other just just that. about made or of caveat mean, In decent add - thing some words, slight broken this would month. by I extent that, quarter, it's

Andrew Wolf

[governance] Sure. both for and how the it the reports And [ph] comments. inflation as about product in and those close those of Thank see just you to talking numbers, inflected well. on cost can we

to a move your through be wants occur? prices allow there as about number much if nobody guy possible real pretty how through is prices they pass lag, first do get just much, up a to or that these time, that competitively, just for and passed to through curious, And pretty do systems almost the management one? sense be normal Just

Tom Bené

Andy. Hey,

of that I think of along. about a what too. in we is percent always mind magnitude these this I historically able with that couple keep is I talked that has the industry, things order things typically been would say pass those mean, inflation, just to to

so, are we that. And And a that lag of in with our bit able typically actually business feel - of good half you a certainly, through. cost of mean, continue to plus, about - of little little I I when think contract if think there about cost don't increases I bit we book terms some sort to is and pass of being a lag, then

what just and pretty ability I So an the think sort I side, say the we pass generally it's - those to modest of our things through. on would again, not inflation, local about these in And feel times immediate of thing. I good call

wouldn't some know accelerated where place So inflation. us rapidly I we've a call got I the in don't -

a our good feel in pretty we're point pretty so. and think do inflation to certainly ability I good about

Andrew Wolf

Okay. trend, the you're And broad-based? their international this because is out still margin a the is if I it just driven on quarter, or of bit currency where inflation sort the UK a could, cost of gross more mainly lastly, contracting getting, of that

Tom Bené

primarily It's little primarily bit in but UK, a UK. Mexico, also it's

Andrew Wolf

Okay. Thank you.

Tom Bené

Yeah.

Joel Grade

Thanks.

Operator

today. This joining today's concludes for you Thank us call. earnings

may You disconnect. now